International Paper (IP)

Short-term

Turnover ratios

The activity ratios provide valuable insights into how efficiently International Paper Co. manages its assets and liabilities to generate revenues.

1. Inventory Turnover: The inventory turnover ratio indicates how many times a company sells its inventory in a given period. International Paper Co. has shown a stable trend in inventory turnover over the years, ranging from 6.91 to 7.80. This suggests that the company efficiently manages its inventory levels, with a consistent ability to sell off its stock.

2. Receivables Turnover: This ratio measures how effectively a company collects cash from its credit sales. International Paper Co. has maintained a relatively steady receivables turnover ratio, indicating a consistent ability to collect payments from customers. The slight decrease in 2021 could be a sign of extended credit terms or changes in customer payment behavior.

3. Payables Turnover: The payables turnover ratio reveals how quickly a company pays its suppliers for credit purchases. International Paper Co. has displayed a stable payables turnover ratio over the years, ranging from 5.31 to 6.30. This implies the company manages its payables efficiently, maintaining a balance between prompt payments and utilizing credit terms offered by suppliers.

4. Working Capital Turnover: The working capital turnover ratio evaluates how efficiently a company utilizes its working capital to generate sales revenue. International Paper Co.'s working capital turnover has fluctuated significantly over the years, from 6.56 to 11.96. A high turnover indicates effective utilization of working capital to support operations and sales growth.

Overall, the activity ratios suggest that International Paper Co. effectively manages its assets and liabilities to support its revenue generation activities. The company's stable inventory turnover, receivables turnover, and payables turnover ratios indicate operational efficiency, while fluctuations in the working capital turnover ratio may reflect changes in business operations or financial strategies.

---

Average number of days

The activity ratios of International Paper Co. reflect its efficiency in managing inventory, collecting receivables, and paying its liabilities.

1. Days of inventory on hand (DOH):
- International Paper Co.'s inventory turnover has been relatively stable over the past five years, ranging from 46.81 to 52.78 days.
- The company takes approximately 50.59 days to sell its inventory on hand, indicating that it maintains a moderate level of inventory relative to its sales.

2. Days of sales outstanding (DSO):
- The days of sales outstanding have varied slightly over the years, with a range of 53.50 to 60.92 days.
- International Paper Co. takes around 59.03 days to collect its receivables, suggesting that it has a moderate pace in receiving payments from its customers.

3. Number of days of payables:
- The days of payables have fluctuated, with a range of 57.92 to 68.77 days.
- The company takes approximately 65.40 days to pay its suppliers, indicating its payment terms are relatively conservative.

In summary, International Paper Co. has maintained a moderate level of efficiency in managing its inventory, collecting receivables, and paying its liabilities over the years. The company's activity ratios suggest a balanced approach to working capital management.

---

Long-term

The fixed asset turnover ratio measures how effectively a company utilizes its fixed assets to generate revenue. International Paper Co. has shown a declining trend in this ratio over the past five years, from 1.67 in 2019 to 1.86 in 2023. This indicates that the company's efficiency in generating sales from its fixed assets has somewhat improved in recent years.

On the other hand, the total asset turnover ratio reflects how well a company uses all its assets to generate revenue. International Paper Co. has also experienced an increase in this ratio over the same period, from 0.67 in 2019 to 0.81 in 2023. This indicates that the company has become more efficient in generating sales from all its assets, not just fixed assets.

Overall, while the company has shown improvement in both fixed asset turnover and total asset turnover ratios, it is important to continue monitoring these ratios to ensure sustained efficiency in asset utilization for revenue generation.